NOMPU SIZIBA: The 2019/2020 tax-return season has kicked off in earnest. And in these days of the Covid-19 pandemic the revenue service is keen to ensure that, as workers file their returns, they do so safely. First prize is to do e-filing, but those taxpayers who are not able to do so will still be able to head into their local Sars office to get assistance. Sars is promising a more efficient and seamless service.
Well, to find out more I’m joined on the line by Sars Commissioner Edward Kieswetter. Thanks very much, Mr Kieswetter, for joining us. It’s the 2019 2020 tax-return season, and a lot has happened in the runup to it with the impact of COVID-19. So, what is it that taxpayers can expect and what are the timelines within which taxpayers should sort out their affairs?
EDWARD KIESWETTER: Nompu, we know that once a year most individual taxpayers have an obligation to submit their returns. Just for clarity, it will be the income that would have been paid by the employer, via the payroll, against which the standard deductions have been also effected. By “standard deductions” we mean the contributions to a pension fund, a retirement fund, contributions to a medical aid, as well as, if they have one, a travel allowance.
What we are doing this differently this year is we are working quite hard to ensure that all of the employer compliance levels are up to date.
The employer, who obviously acts as an agent on behalf of Sars, then also has to make sure that all the monies have been paid over, and then the reconciliation statements are handled every month. A statement is handed to Sars and then, once a year, that is reconciled. We call that the EMP501.
The employer also is a provider of third-party data to make sure that all the demographic data of the individual is with us. We have about 362 employers, and we really have worked hard to make sure that these employers are compliant – and we are probably now close to 90% compliant. We would appeal to the other employers to submit that data. By doing so, they allow us to give a much easier experience to their employees – or otherwise, our taxpayers.
NOMPU SIZIBA: Yes.
EDWARD KIESWETTER: Then we also rely on financial institutions like banks, medical-aid service providers and pension funds to give us the statements of deduction that they have received on behalf of the taxpayer. Why we have moved the data out to the first of September is, first of all, it’s the start of our modernisation journey; but also because of Covid-19 we clearly wanted to minimise the contact between people, both our own staff and taxpayers. You may remember, you may even have been caught up in these long queues in our offices when the peak of the filing season really hits. You can’t afford that, and it would just be the worst thing for the transmission of the virus.
And so we have done a few things. First of all, by front-ending it with all the data, you may not know that we have over 125 million records of individuals, from about 362 employers and over a thousand institutions.
We are using the period from June 1 to the end of August to make sure that taxpayers update their records with us, and that the employers and third-party providers give us all that information.
In the second half of August we will then select three million or thereabouts taxpayers that we call “standard income earners” – and by that we mean someone who has had a single income from one employer, plus the standard deductions. And, because we have all of that information, we can do an assessment on your behalf without you having to submit any information to us. You will then get the estimates from us, from Sars, to say that, according to our records this is the assessment.
If you accept it, you have nothing further to do. Each way, we are going to refund you and you’ll get that refund within 72 hours. And. if there’s an amount that you have to pay in, you’re going to have to pay that amount. Should you choose not to accept that outcome, then you are still welcome to submit your return on September 1.
NOMPU SIZIBA: Commissioner, many taxpayers will have heard that Sars is likely to come down in revenue to the tune of about R300 billion for this fiscal year – 2020 to 2021 – and they’ll be wondering what that means around their ability to get a decent return when they file their tax returns this time round. Has one thing got anything to do with the other?
EDWARD KIESWETTER: They are completely disconnected. Your tax obligation is determined in law and is a reflection of what you have earned, whereas the total tax collected by Sars will be a reflection of the overall economy. So an individual’s tax obligation is unaffected by this, except if they had lost the job. Sadly, many have, and businesses have reduced their conflicts. And then overall we also see a contraction in the consumption economy, which will have a downward effect on consumption taxes like VAT and duties and excise. An individual will not be disadvantaged or favoured because of what’s happening in the economy right now.
NOMPU SIZIBA: Commissioner, one of the things that you have highlighted often is that there have been many leakages in the tax system, and you’ve been trying to put systems in place to be able to identify people who are trying to run away from paying tax. Are your systems in place, and can we expect during this particular tax season for you to be doing more audits, perhaps?
EDWARD KIESWETTER: Nompu, actually in the long run we want to do fewer audits, more targeted audits. To do that, we are continually expanding and increasing the use of data, so that we can use data-modelling and machine-learning to give us a more predictive indication of risks in the tax base, and to let cases for audit be purely based on risk. But, at the same time, we are using data and technology, for example, as I just said to you, to give the taxpayers an effortless experience for them to fulfil their obligation. So we’re not using artificial intelligence only to catch the crooks. We are using it primarily to create a good experience for other honest taxpayers like yourself.
And so the use of data, the use of technology, allows us to do better profiling and therefore a more focused what we call “trace selection”. And it is within a governance structure. So an auditor cannot wake up one morning and decide, Oh, I want to audit Nompu because she didn’t smile at me when I met saw her.
So it’s really data-driven, and we will assess Nompu Siziba based purely on the data that we have. If we feel that there is a data expectancy we will call you, we’ll say we need more information, please supply it to us when you’re done with that.
Most taxpayers in fact will use our online channels, will get the assessment in under three seconds, literally instantaneously. And if there is a refund due, you’ll get that refund paid into your bank account within under 72 hours.
If there is an information discrepancy, we will send you an SMS to say so, and a letter if you are e-filing on our mobi app to say, ”We need the following information” – and it will provide that. Again, if we find data matches, you go through. If not, we may then say to you, you have been put into the audit channel and that will then take time, depending on the complexity.
NOMPU SIZIBA: Commissioner, one last issue, and it’s not related to the tax season. Of course Sars has been one of the agencies that’s been supporting businesses in terms of the PAYE tax deferment. Has that dispensation now ended, and is it your expectation that employers who have been holding back those tax payments must now begin to make them?
EDWARD KIESWETTER: The three-month deferral would end at the end of July. So taxpayers would then have to reinstate their payment obligation. And really, what we would like to say to businesses – and we know that many businesses are struggling – “Don’t take the law into your own hands.” If you do have any challenges, it would be much better to approach Sars. There is provision in the Tax Administration Act where, if we can confirm and verify that you in fact do have a real challenge, we can come to an arrangement for repaying some of that obligation. The last thing you want to do is to apply ostrich logic, put your head into the sand and hope Sars will go away. Sars won’t go away. So we would encourage taxpayers who for any reasons fall behind, to rather engage with us and put in place an agreement on how to settle your obligation and the solution for that.
NOMPU SIZIBA: Many thanks to Edward Kieswetter for his time this evening.